Everyone knows that at $35/barrel oil, virtually every U.S. shale company is cash flow negative and is therefore burning through cash and other forms of liquidity such as bank revolvers and term loans, just as everyone knows that should oil remain at these prices, the U.S. shale sector is facing an avalanche of defaults.
What is less known is who will be the next round of companies to default.
One good place to get an answer is to find which companies' bankers are quietly tightening the liquidity noose (because they don't want to be stuck holding worthless assets in bankruptcy or for whatever other reason), by quietly reducing the borrowing base on existing credit facilities.
It is these companies which find themselves inside this toxic feedback loop of declining liquidity, which forces them to utilize assets even faster, thus even further shrinking the borrowing base against which their banks have lent them money, that will be at the forefront of the epic bankruptcy wave that is waiting to be unleashed across the U.S., leading to tens of billions of defaults junk bonds over the next 12-18 months.
So, without further ado here are 25 deeply distressed companies, whose banks we found have quietly shrunk the borrowing base of their credit facilities anywhere from 6 percent in the case of Black Ridge Oil and Gas to a whopping 51 percent for soon to be insolvent New Source Energy Partners.